## _cr10380 — Executive Summary and Completion Point Analysis (Guinea-Bissau) ## Source details **Canonical URL:** [_cr10380 — Executive Summary and Completion Point Analysis (Guinea-Bissau)](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2010/_cr10380.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2010/_cr10380.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2010/_cr10380.pdf.json) --- ### Overview and recommendation - In December 2000, the IMF and IDA Executive Boards agreed that Guinea-Bissau had met the requirements for the HIPC decision point. - Debt relief determined at the decision point: US$415.9 million in end-1999 PV terms; common reduction factor (CRF) at decision point: 85.4 percent. - Reconciliation and updated analysis lead staff to recommend approval of the HIPC completion point and topping up for Guinea-Bissau. - Staffs consider that Guinea-Bissau has made satisfactory progress toward reaching the HIPC completion point despite delays due to political disruptions and erratic macroeconomic policies. ### Completion point triggers — implementation status - Authorities have implemented 10 of 11 completion point triggers. - One trigger requires a waiver: - Publication of twice-a-year budget execution reports starting in 2001 has not been continuously implemented; authorities began publishing quarterly budget execution reports in 2010 and request a waiver for lack of continuous implementation. - PRSP and program linkages: - First PRSP issued to IMF and IDA Executive Boards in April 2007. - Implementation reviewed satisfactorily by the Joint Staff Advisory Note on the 2010 Annual Progress Report covering July 2009–July 2010. - Preparation of a new PRSP slated to be published in early 2011. - First review under the IMF’s Extended Credit Facility (ECF) being completed concurrently with the HIPC completion point review. ### Progress on specific floating triggers (summary) - Trigger 1 (PRSP): Implemented; full PRSP finalized in 2006; second APR prepared August 2010; second PRSP in preparation (tentative March 2011). - Trigger 2 (Macroeconomic stability / PRGF/ECF): Implemented; IMF approved three-year ECF arrangement on May 7, 2010; first ECF review to be completed with the HIPC completion point document. - Trigger 3 (public expenditure management reports): Waiver requested for lack of continuous implementation since 2001; quarterly comprehensive budget execution reports published in 2010 (two quarterly reports for Q1 and Q2 submitted to Parliament and public). - Trigger 4 (public procurement reform): Implemented; new procurement law passed April 2010; creation of regulatory authority and centralized procurement unit. - Trigger 5 (external audit and corrective measures): Implemented; external audit of 1997–2001 completed 2002; inventory of domestic debt completed in 2008; general administrative accounts for FY2009 submitted to Court of Accounts. - Trigger 6 (elimination of school book fees): Implemented; free primary education introduced in 2002; textbooks distributed then. - Trigger 7 (basic education action plan / gross enrollment): Implemented; gross enrollment ratio reached 104 percent in 2009; net enrollment (age 6–12) 67.4 percent in 2009. - Trigger 8 (National Health Development Program / vaccination): Implemented; vaccination rates rose from about 25 percent in 1999 to 62 percent by end-2007; provisional 2010 indicates over 90 percent vaccinated. - Trigger 9 (malaria action plan / bed net use): Implemented; by end-2007 81 percent of children under 5 and 72 percent of pregnant women used insecticide-treated nets; 2010 MICS indicates over 85 percent of families have at least one mosquito net. - Trigger 10 (HIV/AIDS strategic framework and awareness): Implemented; 2006 survey: 87 percent of 15–24-year-olds knew HIV transmission; 2010 MICS: about 91 percent of women 15–49 heard of HIV/AIDS. - Trigger 11 (demobilization program): Implemented; DRRP adopted 2002 and successfully completed in 2006; about 4,000 ex-combatants demobilized by September 2003; final reintegration phase in 2006 involved about 7,500 ex-combatants. ### Debt reconciliation and revised HIPC assistance - End-December 1999 nominal stock of HIPC-eligible external debt revised upward by US$3.1 million to US$947.5 million. - PV of eligible external debt at end-December 1999 after traditional relief revised upward by US$5.8 million to US$492.7 million. - Required HIPC assistance at end-December 1999 (PV terms) revised from US$415.9 million to US$421.7 million. - CRF increased from 85.4 percent to 85.6 percent. ### Creditor participation (status summary) - Creditors accounting for 81 percent of the revised PV of HIPC assistance have given satisfactory assurances of participation. - Multilateral creditors, Paris Club creditors, and some non-Paris Club bilateral creditors have agreed to participate. - Multilateral creditors (IDA, IMF, AfDB Group) comprise 39.3 percent of total HIPC assistance. - Paris Club creditors account for 23.2 percent of total HIPC assistance and have agreed in principle to participate. - Selected creditor specifics: - IMF’s share revised to SDR 9.2 million (US$11.9 million) in end-1999 PV terms; interim assistance approved SDR 1.56 million; SDR 1.05 million disbursed so far; unused SDR 0.51 million to be disbursed at completion point. - IDA interim debt service reduction delivered: US$46.4 million in decision point PV terms (49.6 percent of IDA HIPC assistance at decision point); remaining assistance via 90 percent reduction of debt service through December 2025. - AfDB Group delivered US$38.2 million (54.2 percent of its total HIPC assistance) through arrears clearance and interim reductions; remainder assumed via 80 percent reduction of debt service until July 2020. - China and Cuba provided outright cancellation of HIPC-eligible claims (June and October 2001). ### Updated debt burden and causes of deterioration (decision point vs completion point) - Decision point projection: PV of debt-to-exports ratio at end-2009 projected at 139 percent assuming full delivery of assistance committed at decision point. - Completion point updated analysis: PV of debt-to-exports ratio at end-December 2009, after HIPC assistance and additional bilateral assistance beyond HIPC, was 319.7 percent. - Breakdown of unanticipated increase in PV of debt-to-exports ratio (difference = 180.7): - Due to differences in parameters (discount and exchange rates): 78.944% of the unanticipated increase - o/w due to differences in the discount rates: 38.821% - o/w due to differences in the exchange rates: 40.122% - Due to lower-than-expected new borrowing between 2000 and 2009: -63.6 (−35%) - o/w due to lower-than-expected disbursements: -63.7 (−35%) - o/w due to lower-than-expected concessionality of the new loans: 0.20% - Due to lower-than-expected exports: 68.8 (38%) — largely from lower-than-projected prices of cashew nuts. - Due to unexpected accumulations of arrears and differences in HIPC debt relief: 96.45 (53%) - Bilateral debt relief beyond HIPC: -67.9 - PV of debt-to-exports ratio after full delivery of HIPC assistance and bilateral debt relief beyond HIPC (actual): 251.8 ### Topping-up assessment and recommended additional assistance - Enhanced HIPC framework permits topping up at completion point when exogenous factors cause significant deterioration. - Staffs conclude Guinea-Bissau meets requirements for topping up. - Staffs recommend additional assistance of US$132.6 million (in end-2009 PV terms) to bring the PV of debt-to-exports ratio, after HIPC assistance and bilateral assistance beyond HIPC, from 251.8 percent at end-2009 to the 150 percent HIPC threshold. ### MDRI and other debt relief at completion point - Upon reaching completion point, Guinea-Bissau would qualify for: - Paris Club completion-point stock-of-debt reductions; - Multilateral Debt Relief Initiative (MDRI) relief from IDA and AfDF. - MDRI implications in nominal terms: - IDA MDRI, if no topping-up: US$126.7 million. - IDA MDRI, if topping-up granted: US$79.6 million. - AfDF MDRI, if no topping-up: US$94.4 million. - IMF: no additional MDRI debt relief by IMF because all outstanding eligible debt to the IMF at completion point would be canceled as part of HIPC assistance. ### Projected impact on debt indicators (baseline and with topping up) - With full delivery of HIPC assistance, additional bilateral assistance beyond HIPC, topping-up assistance, and MDRI assistance: - PV of debt-to-exports at end-2010 with topping up: 88.4 percent. - PV of debt-to-exports projected to decline to 69.1 percent by 2030 with topping up. - Without topping up (but with MDRI): - PV of debt-to-exports at end-2010 after delivery of MDRI: 152.1 percent. - PV of debt-to-exports declines to 72.5 percent by 2030. - Average PV of debt-to-GDP and debt-to-revenue outcomes (selected): - Without topping up: average PV of debt-to-GDP from 29.7 percent (2009–19) to 13.2 percent (2020–30); average PV of debt-to-revenue from 290.1 percent (2009–19) to 114.8 percent (2020–30). - With topping up: average PV of debt-to-GDP from 22.6 percent (2009–19) to 11.2 percent (2020–30); average PV of debt-to-revenue from 225.6 percent (2009–19) to 97.5 percent (2020–30). ### Debt sustainability analysis (LIC DSA) — key conclusions - Baseline DSA conclusion: Guinea-Bissau would face a high risk of debt distress under the baseline assumptions even after HIPC, beyond-HIPC, and MDRI assistance; inclusion of domestic public debt reinforces this conclusion. - With topping-up assistance: risk reduced to moderate — all debt indicators fall below thresholds in the baseline, but two indicators would breach thresholds under stress tests. - Public and publicly guaranteed (PPG) external debt as of end-2009: US$1,066.7 million (122 percent of GDP); amount in arrears: US$427.5 million. - PV of PPG external debt at end-2010 after full delivery of HIPC, beyond-HIPC, and MDRI: US$203.3 million (24.5 percent of GDP; 136.4 percent of exports; 236.1 percent of government revenue excluding grants) — PV debt-to-exports and PV debt-to-revenue breach policy-dependent thresholds. ### Sensitivity analysis and scenarios (selected outcomes) - Alternative scenarios show significant vulnerability of PV of external debt-to-exports indicator in two out of three scenarios: - Scenario 1 (real GDP growth shock): Real GDP growth 1.5 percent lower → debt-to-exports remains above 150 percent until 2014; falls to 120.1 percent in 2020; rises above threshold by end of projection period. - Scenario 2 (exports shock): Export values 15 percent less → debt-to-exports remains above 150 percent until 2019; falls to 145.9 percent by 2030. - Scenario 3 (grants shock): Grants lower by 1 percentage point of GDP → minimal impact on debt-to-exports ratio. - Debt service projections: - Without topping-up: debt service-to-exports after HIPC, beyond-HIPC, and MDRI increases from 1.1 percent in 2011 to 13.3 percent in 2014; declines to 5.1 percent by 2030. - With topping-up: debt service-to-exports rises from 0.3 percent in 2011 to 7.7 percent in 2014; falls to 4.6 percent by 2030. - Stress tests (examples): - Export shock (sharp drop in exports 2011–2012) leads to continuous breach of PV debt-to-exports threshold. - One-time 30 percent nominal depreciation leads to temporary breaches of PV debt-to-GDP, debt-to-revenue, and debt service-to-revenue thresholds. ### Macroeconomic assumptions and aid projections (baseline 2010–2030) - Real GDP growth: 3.0 percent in 2009, about 3½ percent in 2010, gradually to 4.5 percent over long term; cashew production growth average 4½ percent over 2015–2030. - Inflation (GDP deflator and CPI): long-term historical level of 2.5 percent. - Exports growth (dollar terms): 6¼ percent long-term. - Remittances growth: 7.3 percent by 2014; long-term 6½ percent. - Domestic primary fiscal deficit: decreases from 3 percent of GDP in 2009 to about 2½ percent in 2030. - Budget support grants: projected to decline from 7 percent of GDP in 2009 to about 1½ percent in 2030. - External borrowing terms: highly concessional through 2014; average grant element of new disbursements falls from 62 percent in 2014 to 32 percent in 2030. ### Director-level decisions and questions posed - Completion point date assumed: December 16, 2010. - Staff recommend provision of revised HIPC assistance of US$421.7 million in end-December 1999 PV terms (alternate rounded presentation: $422 million). - Staff ask Directors: - Do Directors agree that Guinea-Bissau has reached the completion point under the HIPC Initiative? - Do Directors agree that Guinea-Bissau meets the requirements for topping up? - Do Directors agree that Guinea-Bissau’s creditors have given sufficient assurances to irrevocably commit HIPC Initiative assistance to Guinea-Bissau? ### Policy implications and recommended actions for sustainability - To secure lasting debt sustainability following debt relief, Guinea-Bissau should: - Continue to rely on grants and highly concessional borrowing in the near term. - Strengthen debt management capacity (PDO responsibilities, legal and institutional frameworks, NCPD establishment). - Continue structural reforms and diversify the export base to reduce vulnerability to export-price shocks (notably cashew prices). - Mobilize domestic revenue to reduce dependency on external financing and lower the risk of future debt distress. - Improve public financial management and debt reporting (implementation of SIGFIP, SYGADE, ASYCUDA, and regular budget execution reporting). ### Debt management institutional setup (appendix summary) - Public Debt Office (PDO) within the Ministry of Finance is responsible for public debt portfolio analysis and management. - Legal framework: MoF organic law and annual budget law assign exclusive role to MoF in contracting and administering debt; WAEMU Regulation No. 9 approved but a formal debt strategy not yet in place. - National Committee for Public Debt (NCPD): draft decree finalized but awaiting Council of Ministers approval. - Capacity and systems: staff capacity weak; DMFAS installed but not used; PDO requests technical assistance and training. - Debt records and reporting: monthly outstanding debt stock produced; no specific regular comprehensive debt publication to the National Assembly; IMF structural reforms on debt reporting included in the ECF-supported program. ### Appendix II — Joint IMF/IDA DSA (summary) - Total PPG external debt end-2009: US$1,066.7 million (122 percent of GDP); arrears: US$427.5 million. - Baseline: full delivery of HIPC, beyond-HIPC, and MDRI reduces PPG external debt stock by US$803.6 million to US$263.1 million. - PV of PPG external debt at end-2010: US$203.3 million (24.5 percent of GDP; 136.4 percent of exports; 236.1 percent of government revenue excluding grants) — breaches thresholds for PV debt-to-exports and PV debt-to-revenue. - Under topping-up scenario: all debt indicators fall below thresholds in baseline but remain sensitive under stress tests (moderate risk of debt distress). - Public sector debt projections: total public debt percent of GDP falls from 158.3 percent to 63.3 percent and to 23.5 percent in 2030 (baseline post-completion); PV public debt-to-GDP falls from 54.7 percent to 16.3 percent over projection period. - Continued policy focus recommended on preserving debt relief gains through reforms, diversification, domestic revenue mobilization, and strengthened debt management. *Source: Executive Summary, Box 1, main text, appendices, and staff assessments from the IMF/IDA completion point document for Guinea-Bissau (content unit: _cr10380).* ### Executive Summary ...................................................................................................... ### _cr10380 - Executive Summary ### Overview - In December 2000, the IMF and IDA Executive Boards agreed that Guinea-Bissau had met the requirements for the HIPC decision point. - The amount of debt relief determined at the decision point was US$415.9 million in end-1999 PV terms, implying a common reduction factor (CRF) of 85.4 percent. - Staffs of the IMF and IDA consider that Guinea-Bissau has made satisfactory progress toward reaching the HIPC completion point, despite a prolonged gap between decision point and completion point due to political disruptions and erratic macroeconomic policies. ### Progress on completion point triggers - The authorities have implemented 10 of 11 completion point triggers. - One trigger (publication of twice-a-year budget execution reports starting in 2001) has not been continuously implemented; the authorities began publishing quarterly budget execution reports in 2010 and request a waiver for lack of continuous implementation. - The first PRSP was issued to the IMF and IDA Executive Boards in April 2007; implementation reviewed satisfactorily by the Joint Staff Advisory Note on the 2010 Annual Progress Report covering July 2009–July 2010. - The authorities have initiated preparation of a new PRSP slated to be published in early 2011. - The first review under the IMF’s Extended Credit Facility (ECF) is being completed concurrently with the HIPC completion point review. ### Debt reconciliation and revised HIPC assistance - Following the debt reconciliation exercise, the PV of eligible external debt at end-December 1999, after traditional debt relief, was revised upward by US$5.8 million. - The required HIPC assistance at end-December 1999, in PV terms, was revised from US$415.9 million (decision point) to US$421.7 million (completion point). - The CRF increased from 85.4 percent to 85.6 percent. ### Creditor participation - Creditors accounting for 81 percent of the revised PV of HIPC assistance have given satisfactory assurances of participation. - Most multilateral creditors, all Paris Club creditors, and some non-Paris Club bilateral creditors have agreed to participate. ### Updated debt burden and causes of deterioration - The completion point analysis shows a substantial worsening in debt burden indicators compared with decision point projections. - At decision point, the PV of debt-to-exports ratio at end-2009 was projected to be 139 percent assuming full delivery of assistance committed at decision point. - In the updated analysis at completion point, the PV of debt-to-exports ratio at end-December 2009, after HIPC assistance and additional bilateral assistance beyond HIPC, was 319.7 percent. - Staffs attribute the significant deterioration mainly to exogenous factors including: - changes in discount and exchange rates; - lower-than-expected exports due mostly to lower-than-projected prices of cashew nuts in international markets. ### Topping-up assessment and recommended additional assistance - Under the enhanced HIPC framework, additional (topping-up) assistance at completion point is allowed when exogenous factors cause significant deterioration in debt ratios. - Staffs consider that Guinea-Bissau meets the requirements for topping up. - Staffs recommend additional assistance of US$132.6 million (in end-2009 PV terms) to bring the PV of debt-to-exports ratio, after HIPC assistance and bilateral assistance beyond HIPC, from 251.8 percent at end-2009 to the 150 percent HIPC threshold. ### MDRI and other debt relief at completion point - Upon reaching the completion point, Guinea-Bissau would qualify for: - debt relief beyond HIPC from Paris Club creditors; - debt relief under the Multilateral Debt Relief Initiative (MDRI) from IDA and AfDF. - MDRI implications in nominal terms: - If no topping-up assistance is granted, MDRI debt relief from IDA would amount to US$126.7 million. - If topping-up assistance is granted, MDRI debt relief from IDA would amount to US$79.6 million. - MDRI debt relief from the AfDF would amount to US$94.4 million in the absence of topping-up assistance. - The IMF would not provide additional MDRI debt relief at completion point because all outstanding eligible debt to the IMF at completion point would be canceled as part of HIPC assistance. ### Projected impact on debt indicators - Full delivery of HIPC assistance, additional bilateral assistance beyond HIPC, topping-up assistance, and MDRI assistance at completion point would significantly reduce external debt burden indicators: - Ratio of PV of debt to exports at end-2010 would fall to 88.4 percent. - Ratio of PV of debt to exports is projected to decline to 69.1 percent by 2030. - Future evolution of debt indicators will depend on factors including future economic growth, external shocks, and the terms of new external financing. ### Recommendation - IMF and IDA staffs recommend that the Executive Directors of the IMF and IDA approve the completion point and topping up for Guinea-Bissau under the HIPC Initiative. *Source: Executive Summary of the IMF/IDA completion point document for Guinea-Bissau (content unit: _cr10380 - Executive Summary).* ### Box 1: Status of Floating Completion Point Triggers ### Box 1: Status of Floating Completion Point Triggers ### Poverty Reduction Strategy Paper (Trigger 1) - Status: Implemented. - A full PRSP was finalized in 2006 and prepared in a participatory process involving all segments of society. - The first APR covered implementation in 2007–08 and was approved by the government in August 2009. - A second APR was prepared in August 2010, covering PRSP implementation from July 2009 to July 2010; the APR indicates satisfactory implementation during 2009–10. - A JSAN on the second APR highlights progress, attributes part of the good performance to political and administrative stability, and identifies areas for further improvement. - A second PRSP is in preparation with a tentative publication date of March 2011. - Historical implementation notes and achievements: - PRSP formally issued and presented to the international community in September 2006; implementation began in 2007. - PRSP built on four pillars: (i) strengthening governance, modernizing the public administration and ensuring macroeconomic stability, (ii) enhancing economic growth and job creation, (iii) increasing access to social services and basic infrastructure, and (iv) improving the living conditions of vulnerable groups. - Early implementation (first two years) was below expectations due to political disruptions, high institutional turnover, government financial difficulties, structural weaknesses in the PRSP, and insufficient political ownership. - Political developments in 2008–09 included parliamentary elections on November 16, 2008 (PAIGC won 67 of 100 seats with just under 50 percent of the popular vote), assassinations in March 2009, and subsequent presidential elections with Malam Bacai Sanha assuming office in early September 2009. - From mid-2009 through 2010, strong progress observed, especially in PRSP pillars (i) and (ii); long-term sector-specific policy frameworks and supporting legislation were developed and promulgated. - Financial governance: new institutional budget framework implemented consistent with WAEMU public expenditure management organic framework. - Private sector measures: 31 out of 44 small and medium SOEs privatized or liquidated; adoption in 2008 of nine OHADA Acts; establishment of a Commercial Tribunal; draft PPP Law; new Investment Code; simplification of business registration and creation of a one-stop shop (Centro de Formalização de Empresas (CFE)); enactment of the Telecommunications Law. - Administrative reform: biometric census completed end-August 2009; identification of several hundred “double dippers” and “ghost workers”; new payroll system to be operational in 2011; reorganization of CENFA into a National School of Public Administration (ENA). - Data and M&E: new data production by MEPIR and INEC; Court of Accounts resumed accounting duties; Demographic Census, MICS, and second Rapid Poverty Assessment Survey ILAP completed or initiated, providing baselines and demonstrating gains in social indicators. - Conclusion by IDA and IMF staffs: trigger implemented; satisfactory progress confirmed by JSAN reviewing second APR covering July 2009 to July 2010. ### Macroeconomic Stability (Trigger 2) - Trigger: Continued maintenance of macroeconomic stability as evidenced by satisfactory implementation of the PRGF-supported program. - Status: Implemented. - Key actions: - On May 7, 2010, the IMF Executive Board approved a three-year (2010–13) arrangement under the ECF for Guinea-Bissau. - IMF staff will recommend that the first ECF review be completed together with the HIPC completion point document. - Historical context and constraints: - Macroeconomic performance was poor immediately following the decision point in 2000 due to the 1998–99 armed conflict and subsequent instability. - A PRGF-supported program was in place after the conflict, but divisive and erratic policies, fragile institutions, low technical capacity, and political interference undermined performance. - The PRGF expired at end-2003 without a review being concluded. - Main reasons for earlier shortcomings: (i) constant changes in government and senior staff; (ii) lack of ownership and commitment to economic policies at the highest levels of government; (iii) political interference in expenditure management; and (iv) fragilities in technical capacity for fiscal and macroeconomic management. ### Governance (Triggers 3–5) - Trigger 3: Satisfactory progress in strengthening public expenditure management assessed by the release to the Parliament and the public, twice a year starting in 2001, of comprehensive budget execution reports (and monitoring of basic education, primary health care, and military expenditures). - Waiver required for lack of continuous implementation since 2001. - Historical: comprehensive reports produced in 2001 and 2002; effort abandoned in 2003 due to political and institutional instability. - Since 2009, government began implementing action plan to deepen public expenditure management reforms. - In 2010, government started publishing quarterly comprehensive budget execution reports including spending on basic education, primary health care, and military expenditures; two quarterly reports were published in 2010 for the first and second quarter and submitted to Parliament and local press. - Trigger 4: Implementation of action plan to reform public procurement and installation of new system in all ministries. - Status: Implemented. - A comprehensive overhaul in line with WAEMU guidelines implemented under a 2009 action plan covering the entire administration. - Actions: new procurement law passed in April 2010; creation of a regulatory authority; centralization of government purchases via a central unit of public procurement; creation of an audit unit overseeing transactions processed by the central unit. - Strategy: requirement for public procurement units in each ministry superseded by a pragmatic, centralized approach agreed with IDA to serve all ministries. - Trigger 5: Submission to Parliament of findings of the external audit of the 1997–99 budget outturns and adoption of an action plan of corrective measures. - Status: Implemented. - External audit of 1997–2001 budget outturns completed in 2002 and submitted to the Court of Accounts. - Government completed an inventory of domestic debt in 2008 and implemented measures to transition public expenditure management to WAEMU standards in 2009–10. - Under WAEMU model, authorities recently submitted the general administrative accounts for FY2009 to the Court of Accounts. ### Education Sector (Triggers 6–7) - Trigger 6: Elimination of fees for school books for all primary education students (grades 1–4) in public schools. - Status: Implemented. - In 2002, free primary education introduced in public schools under Education For All (EFA); tuition and book fees eliminated. - Trigger 7: Satisfactory implementation of the basic education action plan, measured by an increase in the gross primary school enrollment ratio to 61 percent. - Status: Implemented. - Gross enrollment ratio progression: - 53 percent in 1995 - 60 percent in 1999 - 102 percent in 2005 - 104 percent in 2009 - Net enrollment (children aged 6–12) was 67.4 percent in 2009. ### Health Sector (Triggers 8–9) - Trigger 8: Implementation of National Health Development Program measured by increase to at least 40 percent in proportion of children under one year old fully vaccinated. - Status: Implemented. - Vaccination rates: - About 25 percent in 1999 - 62 percent fully vaccinated by end-2007 - Provisional data for 2010 indicates over 90 percent of children have been vaccinated - The second National Health Development Plan (NHDP), covering 2011 to 2017, was adopted in May 2010. - Trigger 9: Adoption and satisfactory implementation of malaria action plan measured by increase to 15 percent in use of insecticide-impregnated bed nets by pregnant women. - Status: Implemented. - Historical and outcome data: - 1998: impregnated bed nets used by 5 percent of households - End-2007: 81 percent of children under 5 and 72 percent of pregnant women sleeping under insecticide-treated bed nets - 2010 Multiple Indicators Cluster Survey (MICS): over 85 percent of families have at least one mosquito net ### HIV/AIDS (Trigger 10) - Trigger 10: Adoption of a strategic framework to fight HIV/AIDS and at least 50 percent of population at increased risk (age 14–29) made aware of transmission and prevention methods. - Status: Implemented. - National Aids Control Programme (NACP) 2003–05 prepared and implemented satisfactorily with support from international community, notably GFATM. - Awareness indicators: - 2006 survey: 87 percent of 15- to 24-year-olds knew how HIV was transmitted. - 2010 MICS: about 91 percent of women aged 15 to 49 have heard of HIV/AIDS; 64 percent know it can be transmitted from mother to child. - About 52 percent of women aged 15–49 know at least one method of prevention and 34 percent are aware of three methods. ### Demobilization Program (Trigger 11) - Trigger 11: Demobilization successfully completed and discharged combatants reintegrated into civilian life as established in the DRRP. - Status: Implemented. - Demobilization, Reinsertion and Reintegration Program (DRRP) adopted in 2002 and successfully completed in 2006. - Program outputs: - About 4,000 ex-combatants demobilized by September 2003. - Final phase of reintegration completed in 2006 involved about 7,500 ex-combatants. *Source: Box 1: Status of Floating Completion Point Triggers, as provided in the content unit.* ### 16. In recent years, macroeconomic performance has improved markedly. Following ### _cr10380 - 16. In recent years, macroeconomic performance has improved markedly. Following ### Macroeconomic performance and outlook - Recent years: macroeconomic performance improved markedly following the expiration of the PRGF; IMF supported with two staff-monitored programs (SMPs; 2006 and 2007) and Emergency Post-Conflict Assistance (EPCA; 2008 and 2009). - 2009 EPCA-supported program: solid performance led to stabilization of the economy. - Growth and prices: - Real GDP at market prices (2006–2010 series): 2.1; 3.2; 3.2; 3.0; 3.5 - Real GDP per capita (2006–2010 series): -0.2; 0.9; 1.0; 0.8; 1.2 - GDP deflator (2006–2010 series): -2.0; 6.0; 10.5; 1.1; 2.4 - Consumer price index (annual average) (2006–2010 series): 0.7; 4.6; 10.4; -1.6; 2.5 - External sector and trade volumes (2006–2010 series): - Exports, f.o.b. (US$ values): -17.2; 44.3; 20.1; -7.0; 14.9 - Imports, f.o.b. (US$ values): 19.6; 32.5; 18.8; -0.2; 4.2 - Export volume: 0.9; 19.4; 1.9; 16.1; -5.3 - Import volume: 8.7; 20.5; -8.6; 16.5; 2.5 - Terms of trade (deterioration = -): -2.3; 32.1; 3.2; -22.3; 19.8 - Real effective exchange rate (depreciation = -): 1.1; 3.1; 7.1; -1.8; 1.4 - Investment and savings (2006–2010 series): - Gross investment: 11.9; 13.9; 12.7; 15.5; 14.9 - Government investment (of which): 5.8; 7.0; 6.5; 9.1; 8.6 - Gross domestic savings: -9.9; -4.8; -6.7; -6.5; -1.3 - Government savings (of which): -12.5; -12.2; -11.8; -11.9; -5.2 - Gross national savings: -0.2; 4.5; 2.4; 3.7; 5.9 - Government finances (percent of GDP) (2006–2010 series): - Budgetary revenue: 10.2; 8.0; 9.2; 9.0; 10.4 - Total domestic primary expenditure: 14.4; 13.8; 12.4; 11.9; 11.7 - Domestic primary balance: -4.2; -5.8; -3.2; -2.9; -1.4 - Overall balance (commitment basis) including grants: -4.8; -5.9; -3.8; 2.9; -0.5 - Overall balance (commitment basis) excluding grants: -11.1; -14.1; -12.0; -12.9; -10.1 - External current account (including official current transfers) (2006–2010 series): -5.6; -4.5; -4.1; -4.1; -5.9 - Excluding official transfers (2006–2010 series): -12.8; -9.7; -10.5; -12.1; -9.3 - Memorandum items (US$ millions, unless otherwise indicated) (2006–2010 series): - Current account balance (including official current transfers): -32.7; -31.3; -34.7; -34.5; -48.9 - Overall balance of payments: -24.9; 5.6; -16.9; -11.6; -8.7 - Nominal GDP at market prices (CFAF billions): 302.5; 331.0; 377.5; 393.1; 416.7 - Sources for table: Guinea-Bissau authorities; and IMF staff estimates and projections. - Note: Based on new GDP figures which doubled the previous GDP level due to broader coverage of the economy, consistent with System of National Accounts 1993. ### Performance under the ECF arrangement (2010) - Overall assessment: Performance under the current ECF arrangement has been satisfactory. - 2010 developments: - Real GDP accelerated slightly to an estimated 3.5 percent in 2010 from 3.0 percent in 2009. - As of end-June 2010, the domestic primary surplus reached 0.5 percent of GDP, about 2 percentage points of GDP higher than envisaged under the ECF. - Average inflation in 2010 is expected to remain below the WAEMU target of 3 percent. - Current account deficit narrowed, driven by higher prices of cashew nuts, lower prices for imported food products, and stable net remittances. - All structural benchmarks under the ECF have been met, including measures to strengthen budget planning and execution, increase revenue collection, and improve the business environment. - Staff conclusion: IMF and IDA staffs conclude that the trigger on macroeconomic stability has been implemented. ### Public financial management and governance (HIPC triggers and reforms) - Trigger 3 (biannual comprehensive budget execution reports released to Parliament and public): - 2002: executive agencies released comprehensive, biannual budget execution reports covering basic health care, primary education, and the military. - Process halted in 2003 due to political instability; resumed in 2008 as part of a broader public financial management reform agenda. - Government actions (2009–2010): - Formulated and adopted a priority action plan for public financial management based on a new institutional framework governing the budget cycle, including a new legal framework and the introduction of IT systems. - Adopted an Organic Law for Budgeting and a Public Accounting Decree in 2009–2010. - Separated execution and oversight functions via creation of the Office of Financial Controller; reorganized the General Budget Directorate; issued a manual of procedures for budget execution. - Prepared 2009 and 2010 budgets according to the new WAEMU-based budget classification system. - Introduced Integrated System for Public Financial Management (SIGFIP): budget preparation, financial execution, and accounting modules; enabled timely quarterly budget execution reports and annual state-of-accounts reports. - In 2009 prepared an annual budget execution report for 2008 and two semiannual reports for 2009; since beginning of 2010 MoF published quarterly budget execution reports and provided the Court of Accounts with the Annual Statement of Accounts for 2009; in 2010 two quarterly reports for Q1 and Q2 were submitted to Parliament and published in local press. - Introduced computerized debt management system (SYGADE) and upgraded automated customs administration (ASYCUDA) with UNCTAD support. - Prepared a medium-term plan (2009) to address domestic arrears with two phases: settle identified/recognized arrears (commercial banks, BCEAO, wage arrears from 2008, private sector arrears pre-dating the civil war) through cash payments and rescheduling; audit remaining post-civil war arrears and offset verified arrears against creditors’ tax arrears where applicable. - Staff recommendation: IDA and IMF staffs support a waiver for lack of continuous implementation since 2001 on the basis of satisfactory recent progress; staffs consider the HIPC completion point trigger to have been adequately implemented. - Trigger 4 (public procurement reform action plan implemented and new system installed in all ministries): - 2009 action plan implemented: comprehensive overhaul of procurement system in line with WAEMU; legislative reforms passed in 2010 including new procurement code and related oversight/enforcement measures. - Institutional setup: - Creation of Autoridade Regulatória de Concursos Públicos (ARCP) as appellate mechanism. - Creation of Unidade Central de Compras Públicas (UCCP) at MEPIR to determine line ministries’ requirements, oversee bidding, and make purchases. - Direção Geral de Compras Públicas (DGCP) at MoF vested with oversight and auditing authority. - Procurement Reform Pilot Program (2006–2009 LICUS-funded): installed procurement units in five major ministries (Education, Health, Finance, Agriculture, Infrastructure); trained staff; prepared procurement guidelines; provided equipment. - Revised strategy: pragmatic centralized approach agreed with IDA due to limited transaction volumes; central procurement unit reviews and approves procurement plans prepared by trained line ministry staff. - Staffing and capacity: all key staff in new procurement institutions appointed; government seeking international support for equipment. - Staff conclusion: IDA and IMF staffs conclude that the trigger on public procurement reforms has been implemented; requirement to establish procurement units in all ministries was superseded by the new centralized strategy. - Trigger 5 (external audit of 1997–99 budget outturns submitted to Parliament and corrective action plan adopted): - 2002: external audit of budget outturns for 1997–2001 completed and submitted to the Court of Accounts; audit recommended inventory of government domestic bond debt, stricter application of public financial management rules, and updating legal framework to WAEMU standards. - Implementation timeline and issues: - Inventory of domestic debt: initiated in 2003, interrupted in 2005, completed in 2008 with EU support; revealed irregularities in 1997–98 domestic debt issuance. - Transition to WAEMU-consistent public expenditure management suffered delays due to political instability; only in the last two years (relative to report) have measures been implemented to meet audit recommendations. - General administrative accounts for 2009 were prepared with technical assistance and submitted to the Court of Accounts in September 2010—the first year with new WAEMU-consistent organic statutes applied. - Staff conclusion: IDA and IMF staffs conclude that this trigger has been implemented. ### Education sector triggers and outcomes - Trigger 6: Elimination of fees for school books for all primary education students (grades 1–4) in public schools: - Free primary education established in all public schools in 2002: enrollment fees eliminated; textbooks distributed free to all primary students. - Complementary measures: school feeding program in the majority of primary schools. - Enrollment outcomes: - Literacy rate for young women rose to 40 percent. - Total primary enrollment increased from 150,000 in 2001 to 270,000 in 2006 and reached 300,000 in 2009. - Challenges to quality: - Loss of revenue from fees and rapid enrollment growth strained resources. - Textbooks and teaching materials lacking; no new books distributed since 2004 when the IDA-financed Basic Education Support Project (BESP) closed. - The 1-textbook-per-student ratio achieved in 2002–2003 has vanished. - Government working with development partners to address shortages. - Staff conclusion: IDA and IMF staffs conclude that this trigger has been implemented. - Trigger 7: Satisfactory implementation of the basic education action plan, measured by an increase in the gross primary school enrollment ratio to 61 percent (trigger stated). *Source: IMF staff report text contained in the provided content unit.* ### 40. Due in large part to the elimination of school fees, the gross enrollment rate for ### _cr10380 - 40. Due in large part to the elimination of school fees, the gross enrollment rate for ### Education: enrollment and reforms - Gross enrollment rate for primary schools rose from 53 percent in 1996 to 104 percent in 2009. - Net enrollment rate for primary schools was 67.4 percent. - Divergence between gross and net rates attributed to delayed enrollment and completion; theoretical primary age 7 to 12 years while actual primary students range about 6 to 18 years. - Policy and legislative milestones: - Letter on Education Policy (LEP) 201020 approved September 2009 to set overall sector objectives. - Interim Education Sector Plan (ESP) 201113 approved August 2010 and endorsed by cooperating partners September 2010, enabling formal entry into the Education for All Fast Track Initiative (EFA-FTI). - Government preparing a Fast Track Initiative Catalytic Fund Request for additional resources to fully implement the ESP. - New Law on the Organization of the Education System (Lei de Bases do Sistema Educativo) approved March 2010, expanding primary education from 6 years to 9 years. - Law on Teaching Careers (Carreira Docente) restructures teacher hiring and career advancement. - Establishment of a unified teacher-training school by merging the three existing schools. - Conclusion: IDA and IMF staffs conclude that this trigger has been implemented. ### Health sector: National Health Development Program and vaccination - Trigger 8 target: increase to at least 40 percent in proportion of children under one year old fully vaccinated. - Progress and coverage: - 62 percent of children under 1 year old fully vaccinated by end-2007 (versus less than 25 percent in 1999). - 2010 MICS provisional analysis shows under-five mortality and infant mortality improved over the past eight years: - Under-five mortality: rose from 203 per thousand live births in 2002 to 223 in 2006, then fell to 155 in 2010. - Infant mortality: increased from 124 per thousand live births in 2002 to 138 in 2006, then dropped to 104 in 2010. - MDG infant mortality target cited as 47.3 per thousand. - 2010 MICS vaccination rates (current data): - BCG: 93.5 percent - Polio 1: 91 percent - Polio 3: 74.5 percent - DPT 1: 92.0 percent - DPT 3: 76.2 percent - Measles: 60.6 percent - Yellow fever: 48.9 percent - Drivers of improvement: government’s 200509 immunization plan; intensive vaccination training program in 200910; construction of solar-powered cold-chain facilities. - NHDP 201117 adopted May 2010 outlines strategies to attain health-sector MDGs by 2020. - Specific 2009 accomplishments: construction of four new health centers; rehabilitation of several health centers and two major hospitals and operating theaters; hiring and training of 115 new healthcare professionals; provision of incentive pay and moving allowances for health personnel in remote areas. - Conclusion: IDA and IMF staffs conclude that Trigger 8 has been implemented. ### Malaria action plan and bed-net use - Trigger 9 target: increase to 15 percent in use of insecticide impregnated bed nets by pregnant women. - Historical and survey-based coverage: - 2002 malaria action plan substantially increased bed-net use. - By end-2007: 81 percent of children under 5 and 72 percent of pregnant women sleeping under insecticide-treated bed nets. - 2010 MICS: over 85 percent of families have at least one mosquito net. - 2008 anti-malaria strategy update and 2009–2010 actions: improved availability of anti-malarial medications and public awareness campaigns. - Conclusion: IDA and IMF staffs conclude that Trigger 9 has been implemented. ### HIV/AIDS: strategic framework and outreach - Trigger 10: Adoption of a strategic framework to fight HIV/AIDS; target that at least 50 percent of population at increased risk (age 14–29) made aware of transmission and prevention methods. - National Aids Control Programme (NACP) for 200305 prepared and extended; supported by Global Fund grants during 2003–2010. - Institutional and programmatic developments: - Technical committee for monitoring and National Forum on HIV/AIDS established; website operational at http://www.sida.guine-bissau.org. - Forty-three partnership and financing agreements concluded; 35 local institutions involved (19 civil-society organizations, 12 national public institutions, 4 private businesses). - 22 specialized units set up in 2009 for counseling and voluntary testing; 10 additional units revamped; over 29,000 people tested in that period. In June 2010, an additional 24,300 people in the Bissau Autonomous District were tested. - 2010 MICS knowledge and training indicators: - About 91 percent of women aged 15 to 49 have heard of HIV/AIDS. - About 52 percent of women aged 1549 know at least one method of prevention. - 34 percent are aware of three methods. - 64 percent know that HIV/AIDS can be transmitted from mother to child. - Training in 2009 and 2010: 57 health professionals trained in antiretroviral (ARV) treatment and treatment of opportunistic infections; 22 received updated training on dispensing medications. - ARV treatment centers increased from 12 in 2008 to 26 in 2009. - As of December 2009, 2,764 patients receiving ARV treatment (29 percent men, 67 percent women, 4 percent children). - Conclusion: IDA and IMF staffs conclude that Trigger 10 has been implemented. ### Demobilization, Reinsertion and Reintegration Program (DRRP) - Trigger 11: Demobilization completed and discharged combatants reinserted as established in the DRRP. - DRRP timeline and coverage: - Launched in 2002 and completed in 2006. - 2002 census of security forces: total 12,595 (7,835 military, 2,709 paramilitary, 2,051 militia). - By June 2004 demobilized 4,392 former combatants (1,950 military, 391 paramilitary, all 2,051 militia). - By June 2004 effective force reduced to 8,203 (5,885 military, 2,318 paramilitary). - 2008–09 biometric censuses under RDSS indicated effective force totaled 7,908 (4,458 military and 3,450 paramilitary). - Evidence of some previously demobilized combatants returning, particularly to paramilitaries, but overall force strength at decade low. - Reinsertion phase: - Completed over 12 months; benefits included (i) counseling and information referral services, (ii) a one-time demobilization stipend, (iii) ongoing financial support during reintegration. - Support services estimated to have directly benefited 11,300 individuals. - Reintegration program launched April 2003, final phase completed in 2006; estimated to have benefited approximately 7,500 ex-combatants. - RDSS objectives and progress: - Objectives: reduce military size and expenditures; professionalize armed services; change ethnic composition to increase diversity; improve barracks housing, sanitary, and healthcare facilities; establish military pension fund and veterans’ benefits. - Early institutional framework created (inter-ministerial committee and technical committee). - EU support included a €8 million project financing early activities and a biometric census. - 2010 new legal framework adopted by the ANP, including multiple laws (Law on National Defense and the Armed Forces; Basic Organic Law of the Organization of the Armed Forces; Law on the Responsibilities of the Armed Forces; Law on Compulsory Military Service; Code of Military Justice; Organic Law of the Police Force for Public Order; Organic Law of the National Guard). - EU announced it would not renew its resident mission in support of RDSS following political developments; donor coordination and further plans (including a donor roundtable in 2011) continue with UNIOGBIS, ECOWAS, and CPLP. - Conclusion: IDA and IMF staffs conclude that Trigger 11 has been implemented. ### Updated debt relief and debt sustainability analysis: end-December 1999 revisions - End-December 1999 nominal stock of HIPC-eligible external debt revised upward by US$3.1 million to US$947.5 million. - PV of debt after traditional debt relief revised upward by US$5.8 million to US$492.7 million. - Reconciliation adjustments by creditor category: - Multilateral creditors: - Total multilateral debt stock at end-December 1999 decreased by US$0.7 million in nominal terms to US$426.1 million. - Corresponding PV revised from US$238.9 million to US$238.1 million. - Paris Club creditors: - Total nominal debt to Paris Club creditors at end-December 1999 decreased by US$79.2 million to US$322.7 million. - PV of debt to Paris Club creditors revised from US$176.1 million to US$114.4 million. - Change driven primarily by reclassification of Portugal as a non-Paris Club creditor. - Note: Debt owed to Portugal at decision point was estimated to be US$68.7 million; revised amount at end-December 1999 is US$76.6 million based on updated creditor information. - Other official bilateral creditors: - Nominal end-December 1999 stock increased by US$83.4 million to US$198.5 million, mainly due to reclassification of debt owed to Portugal. - Corresponding PV after traditional relief increased from US$71.3 million to US$139.9 million. - Commercial creditor: - Nominal outstanding commercial debt at end-December 1999 decreased from US$0.6 million to US$0.3 million based on creditor statements in Guinea-Bissau authorities’ records. *Excerpted from _cr10380 - 40. Due in large part to the elimination of school fees, the gross enrollment rate for* ### 61. Exports of goods and services have not changed. The estimate of the 1997 ### Exports of goods and services have not changed. The estimate of the 1997 ### Revision of HIPC Assistance and Status of Creditor Participation - The estimate of the 1997–99 average of exports of goods and services used to evaluate HIPC assistance at the decision point remains unchanged at US$47.3 million. - The required HIPC assistance at end-December 1999 PV terms has been revised upward from US$415.9 million (estimated at the decision point) to US$421.7 million. - The common reduction factor (CRF) increased from 85.4 percent to 85.6 percent. - Financing assurances have been received from creditors accounting for 81 percent of the revised PV of HIPC assistance estimated at the decision point. - Multilateral creditors (IDA, the IMF, and the AfDB Group) comprise 39.3 percent of total HIPC assistance; IsDB and ECOWAS have not confirmed participation. - Paris Club creditors account for 23.2 percent of total HIPC assistance and have agreed in principle to participate. - Among non-Paris Club bilateral creditors: - Portugal (the largest) has confirmed participation. - China and Cuba have provided outright cancellation of their HIPC-eligible claims. - Multilateral creditors: total revised HIPC assistance of US$203.8 million in end-December 1999 PV terms. - Interim debt relief from IMF, IDA and AfDB amounts to US$86.5 million or 49 percent of their total HIPC assistance estimated at decision point. - EIB intends to write off outstanding loans. - IsDB, IFAD, BADEA, OFID, and ECOWAS are assumed to deliver assistance through concessional restructuring of arrears. - IMF specifics: - IMF’s share of HIPC assistance revised to SDR 9.2 million (US$11.9 million) in end-1999 PV terms. - SDR 1.56 million approved as interim assistance to meet debt service to the Fund; SDR 7.64 million (in PV terms), together with any unused interim assistance, to be delivered at completion point through a stock-of-debt operation. - Interim assistance approved: SDR 0.54 million and SDR 1.02 million on decision point and May 2010, respectively; SDR 1.05 million disbursed so far; unused interim assistance SDR 0.51 million to be disbursed at completion point. - IDA specifics: - Interim period debt service reduction delivered: US$46.4 million in decision point PV terms, or 49.6 percent of total IDA HIPC assistance estimated at decision point. - IDA assumed to provide remaining assistance via 90 percent reduction of debt service through December 2025. - Executive Directors approved interim debt relief beginning January 2001 (90 percent reduction); January 2008 increased limit from one third to one half of PV of debt relief deliverable during interim period. - AfDB Group specifics: - HIPC assistance amounting to US$38.2 million, or 54.2 percent of AfDB Group’s total HIPC assistance, delivered through arrears clearance at end-2000 and interim debt service reduction. - Remainder assumed delivered through 80 percent reduction of debt service from completion point until July 2020. - Bilateral and commercial creditors: - Paris Club share estimated at US$97.9 million in end-December 1999 PV terms. - Interim Paris Club assistance estimated at US$28.3 million in end-December 1999 PV terms delivered via flow reschedulings on Cologne terms (January 21, 2001, and July 6, 2010). - Paris Club signaled readiness to provide completion-point stock-of-debt reductions; many Paris Club creditors indicated voluntary additional cancellation beyond HIPC estimated at about US$88.5 million in end-December 2009 PV terms. - Non-Paris Club bilateral creditors PV of HIPC assistance at end-December 1999 estimated at US$119.8 million. - Portugal: 12.3 percent of HIPC-eligible debt. - Taiwan Province of China: 8.1 percent. - Other official bilateral creditors: 7.9 percent. - China and Cuba provided outright cancellation of HIPC-eligible claims in June and October 2001. - The Franco-Portuguese Bank commercial claim status is being verified. ### Considerations for Exceptional Topping-Up Assistance - HIPC framework allows topping up at completion point if exogenous factors caused a fundamental change in economic circumstances; additional relief provided proportionally to bring PV of debt-to-exports ratio to HIPC threshold. - Six countries have received topping-up assistance to date: Burkina Faso, Ethiopia, Niger, Rwanda, Malawi, and São Tomé and Príncipe. - Debt relief analysis updated using loan-by-loan debt data, exchange rates and interest rates as of end-December 2009. - At end-December 2009 nominal stock of external debt: US$1,066.7 million. - Multilateral creditors: US$529.9 million or 49.7 percent of total nominal debt. - IDA: 28.5 percent of total nominal debt. - IMF: 0.9 percent. - AfDB Group: 14.4 percent. - Paris Club creditors: 22.6 percent of total outstanding nominal debt at end-December 2009. - Non-Paris Club creditors: 27.7 percent of total; Portugal: 14.5 percent. - PV of debt-to-exports ratio at end-December 2009 after full delivery of HIPC assistance committed at decision point: 319.7 percent (which is 180.7 percentage points above the projection at time of decision point). - Breakdown of unanticipated increase in PV of debt-to-exports ratio (difference between actual and projected as of December 31, 2009): - PV of debt-to-export ratio (as projected at Decision Point) 1/: 139.0 - PV of debt-to-export ratio (actual) 1/: 319.7 - Unanticipated difference in the PV of debt-to-export ratio 2/: 180.7 (100%) - 1. Due to differences in the parameters: 78.944% - o/w due to differences in the discount rates: 38.821% - o/w due to differences in the exchange rates: 40.122% - 2. Due to lower-than-expected new borrowing between 2000 and 2009: -63.6 (−35%) - o/w due to lower-than-expected disbursements: -63.7 (−35%) - o/w due to lower-than-expected concessionality of the new loans: 0.20% - 3. Due to lower-than-expected exports: 68.8 (38%) - 4. Due to unexpected accumulations of arrears and differences in HIPC debt relief: 96.45 (53%) - Bilateral debt relief beyond HIPC: -67.9 - PV of debt-to-export ratio after full delivery of HIPC assistance and bilateral debt relief beyond HIPC (actual): 251.8 - Attribution of causes: - Exogenous factors (changes in discount and exchange rates) account for 44 percent of the increase (category 1). - Lower-than-expected exports account for 38 percent (category 3), mainly due to lower-than-expected export prices (notably cashew prices) rather than volumes. - Changes in external financing (program off-track, lower new borrowing, accumulation of arrears, lack of comprehensive debt relief) account for a net 18 percent of the unanticipated increase; within this, lack of HIPC debt relief accounts for 43 percent and accumulation of arrears mainly to bilateral creditors accounts for 10 percent. - Staff view and recommendation: - Guinea-Bissau meets requirements for topping up. - Staffs recommend additional assistance of US$132.6 million in end-2009 PV terms under the HIPC Initiative to bring PV of debt-to-exports ratio from 251.8 percent (after additional bilateral debt relief beyond HIPC) to the HIPC threshold of 150 percent. ### Debt Relief under the Multilateral Debt Relief Initiative (MDRI) - Conditional on reaching HIPC completion point, Guinea-Bissau would qualify for MDRI from IMF, IDA, and AfDB Group. - MDRI from IMF: - Extended interim period means estimated HIPC resources available at completion point sufficient to cover MDRI-eligible debt. - There will not be any topping up assistance from the IMF, as Guinea-Bissau will not have IMF debts outstanding at completion point. - MDRI from IDA: - In absence of topping-up, IDA would provide MDRI debt relief amounting to US$126.7 million in nominal terms. - If topping-up is granted, IDA MDRI debt relief would amount to US$79.6 million. - IDA would cancel debt service obligations for credits disbursed before December 31, 2003, and still outstanding at December 31, 2010, after application of HIPC assistance and potential topping up. - MDRI from IDA implies average debt service savings of US$4.0 million per year until 2044 in absence of topping up, or US$2.5 million per year if topping up is granted. - MDRI from AfDF: - In absence of topping up, AfDF would provide MDRI debt relief amounting to an estimated US$94.4 million in nominal terms starting from completion point (based on debt disbursed as of December 31, 2004, and outstanding at completion point). - MDRI from AfDF implies average debt service savings of US$2.3 million per year until 2051 in absence of topping up. ### Debt Sustainability Outlook after MDRI, 2010–30 - Baseline macroeconomic framework assumptions (see Box 2): - Growth increases to 4.5 percent over the long term. - Inflation remains at historical level of 2.5 percent. - Primary fiscal deficit and current account deficit gradually narrow. - These projections consistent with medium-term macroeconomic framework under the ECF arrangement. - Projected impacts of full delivery of HIPC assistance, additional bilateral assistance beyond HIPC, topping-up assistance, and MDRI: - Without topping up: - PV of debt-to-exports ratio at end-2010 after delivery of MDRI: 152.1 percent. - PV of debt-to-exports ratio declines to 72.5 percent by 2030. - Average PV of debt-to-GDP ratio: from 29.7 percent (2009–19) to 13.2 percent (2020–30). - Average PV of debt-to-revenue ratio: from 290.1 percent (2009–19) to 114.8 percent (2020–30). - With topping up: - PV of debt-to-exports ratio at end-2010 after delivery of MDRI: 88.4 percent. - PV of debt-to-exports ratio declines to 69.1 percent by 2030. - Average PV of debt-to-GDP ratio: from 22.6 percent (2009–19) to 11.2 percent (2020–30). - Average PV of debt-to-revenue ratio: from 225.6 percent (2009–19) to 97.5 percent (2020–30). - Box 2: Key Baseline Macroeconomic Assumptions (2010–2030) - Real GDP growth: 3.0 percent in 2009, about 3½ percent in 2010, gradually to 4.5 percent over long term; supported by agricultural diversification, infrastructure rebuilding, and average cashew production growth of 4½ percent over 2015–2030. - Inflation (GDP deflator) assumed to grow slightly below CPI inflation in 2010; long-term GDP deflator and CPI growth at historical level of 2.5 percent. - Current account deficit (excluding official transfers) expected to decline from 9.3 percent of GDP in 2010 to 6.8 percent in 2030. - Exports of goods and services (mainly cashews) assumed to grow at long-term rate of 6¼ percent (in dollar terms). - Remittances growth: 7.3 percent (in dollar terms) by 2014; long-term remittances growth projected at 6½ percent. - Domestic primary fiscal deficit assumed to decrease from 3 percent of GDP in 2009 to about 2½ percent in 2030 due to stronger revenues and improved public expenditure management. *IMF staff report text (excerpts) from the Guinea-Bissau debt relief and HIPC completion point analysis.* ### 2009. Budget support grants are projected to gradually decline from the 7 percent of GDP received ### _cr10380 - 2009. Budget support grants are projected to gradually decline from the 7 percent of GDP received ### Macroeconomic assumptions and aid projections - Budget support grants are projected to gradually decline from the 7 percent of GDP received in 2009 to about 1½ percent in 2030. - External borrowing through 2014 remains on highly concessional terms, in line with terms offered by the International Development Association and the African Development Fund. - Beginning in 2015, with debt indicators slowly improving, some borrowing on less concessional terms is assumed to finance investments with high returns. - As a result, the average grant element of new disbursements falls gradually from 62 percent in 2014 to 32 percent in 2030. - 1/ The macroeconomic assumptions are subject to more uncertainty than usual given the country’s fragile political situation. ### Debt service projections and scenarios for topping-up assistance - Debt service ratios are projected to increase through 2014 and then gradually decline. - The projected increase reflects assumptions regarding the rescheduling of post-cutoff date bilateral debt, consistent with the terms of the July 2010 Paris Club agreement. - Without topping-up assistance: - The debt service-to-exports ratio after HIPC assistance, additional assistance beyond HIPC, and MDRI assistance would increase from 1.1 percent in 2011 to 13.3 percent in 2014. - Starting in 2015, the ratio would decline, reaching 5.1 percent at the end of projection period. - With topping-up assistance: - The debt service-to-exports ratio after HIPC assistance, additional assistance beyond HIPC, and MDRI assistance would increase from 0.3 percent in 2011 to 7.7 percent in 2014 before falling to 4.6 percent by 2030. ### Sensitivity analysis and long-term debt sustainability - The PV of external debt-to-exports indicator worsens significantly in two out of three alternative scenarios. - Scenario 1 (real GDP growth shock): - Real GDP growth is 1.5 percent lower than in the baseline scenario. - The debt-to-exports ratio remains above the 150 HIPC threshold until 2014, reaches a low of 120.1 percent in 2020, before rising back above the threshold by the end of the projection period. - Scenario 2 (exports shock): - Export values increase by 15 percent less during the projection period than in the baseline scenario. - The debt-to-exports indicator remains above the HIPC threshold until 2019 and falls to only 145.9 percent by 2030. - Scenario 3 (grants shock): - Grants are lower by 1 percentage point of GDP than in the baseline scenario. - The impact on the debt-to-exports ratio is minimal. - Common assumption across scenarios: - New external borrowing would adjust to accommodate the impact of shocks on revenue. - Policy implications from sensitivity analysis: - The debt-to-exports ratio is particularly sensitive to lower GDP growth and lower exports. - To reduce vulnerability to shocks, it will be crucial to: - continue to make progress on structural reforms, - diversify the export base over the long term, - mobilize domestic revenue to reduce the dependency on external financing. ### Conclusions and staff recommendations - In the view of the staff of the IMF and IDA, Guinea-Bissau has met the requirements established in December 2000 for reaching the completion point under the HIPC Initiative, subject to the provision of a waiver for one completion point trigger. - Revisions to the end-1999 database have resulted in an upward adjustment in the amount of HIPC assistance. - Staffs are of the view that Guinea-Bissau meets the requirements for topping-up assistance. - Full delivery of HIPC assistance, additional bilateral assistance beyond HIPC, and MDRI assistance would significantly reduce Guinea-Bissau’s external public debt. However, topping-up assistance would be necessary to bring the PV of debt-to-exports ratio at end-December 2009 to the HIPC threshold of 150 percent. - The staffs of the IMF and IDA recommend that the Executive Directors determine that Guinea-Bissau has reached the completion point under the HIPC Initiative. *Source: IMF/IDA staff assessment and projections as presented in the document.* ### 85. Executive Directors may wish to discuss the following issues: ### _cr10380 - 85. Executive Directors may wish to discuss the following issues: ### Completion point - Question for Directors: Do Directors agree that Guinea-Bissau has reached the completion point under the HIPC Initiative? - Completion point (CP) is assumed on December 16, 2010 (as referenced in IMF assistance delivery schedules). ### Data revision (HIPC assistance amounts) - Staff recommendation: Provide the revised amount of HIPC assistance of US$421.7 million in end-December 1999 PV terms to Guinea-Bissau. - Alternate presentation in text/figures: Total Estimated HIPC Enhanced Assistance: $422 million, end-December 1999 NPV terms. ### Topping up - Question for Directors: Do Directors agree with the conclusion that Guinea-Bissau meets the requirements for topping up? - Table 7 figures (completion point / topping-up context): - Assistance at the Decision Point (revised): NPV of debt 492.7; 3-year exports moving average 47.3; NPV of assistance 421.7; NPV of debt after assistance 71.0; NPV of debt-to-exports ratio (in percent) 150.0; Common Reduction Factor 85.6%. - Completion Point Estimates: NPV after enhanced HIPC assistance 416.4; 3-year exports moving average 130.3; NPV after bilateral debt relief beyond HIPC 327.9; Calculation of possible topping up assistance shows total NPV after bilateral debt relief beyond HIPC 327.9 and resulting NPV after topping-up scenarios leading to NPV of debt-to-exports ratio values reported (e.g., 40.4 percent in table context). ### Creditor participation - Question for Directors: Do Directors agree that Guinea-Bissau’s creditors have given sufficient assurances to irrevocably commit HIPC Initiative assistance to Guinea-Bissau? - Key status items (Table 12, December 31, 1999 PV terms, revised at completion point): - Total revised HIPC assistance (US$ millions): 421.7. - TOTAL: 421.7 (100.0 percent) — satisfactory reply/modalities to deliver assistance: 81.1 percent (as presented in the table summary). - Multilateral creditors (total multilateral): 203.8 (48.3 percent of total); status: largely “Yes” with delivery modalities described (examples): - IDA: 93.4 (22.2 percent) — Yes; debt relief delivered through debt service reduction during the interim period amounts to US$46.4 million in decision point PV terms; remaining relief via a 90 percent reduction of GNB's debt service through December 2025. - AfDB: 60.4 (14.3 percent) — Yes; interim arrears clearance and debt service reduction amount US$38.2 million in decision point PV terms; remaining reduction via debt service reductions through July 2020. - IMF: 11.9 (2.8 percent) — Yes; interim assistance SDR1.5 million delivered, SDR7.6 million (in PV terms) to be delivered at completion point through a stock-of-debt operation. - Some multilaterals listed as “No” or “No/negotiations ongoing” for formal satisfactory replies (e.g., IsDB: 11.6 (2.7 percent) — No; ECOWAS — No). - Paris Club Creditors: 97.9 (23.2 percent) — Yes; interim assistance delivered through a Cologne flow during the interim period; participating countries agreed in principle to provide Enhanced HIPC assistance. - Non-Paris Club / Other bilateral and commercial creditors: 119.8 (28.4 percent) — mixed status; examples: - China: 2.1 (0.5 percent) — Yes; canceled 100 percent of its claims in 2001. - Portugal: 52.0 (12.3 percent) — Yes; agreed in principle to provide HIPC debt relief at completion point. - Several creditors remain with “No” (contacts ongoing) status: Algeria 3.6 (0.9 percent); Angola 7.1 (1.7 percent); Kuwait 11.0 (2.6 percent); Libya 1.0 (0.2 percent); Pakistan 2.0 (0.5 percent); Saudi Arabia 6.2 (1.5 percent); Taiwan Province of China 34.3 (8.1 percent); United Arab Emirates 0.1 (0.0 percent). - Commercial creditors: 0.2 (0.1 percent) — status: No; status of claim being verified. - Aggregate presentation (Table 12): Total multilateral 203.8 (48.3%); Total bilateral and commercial 217.9 (51.7%); TOTAL 421.7 (100.0%) with overall satisfactory reply/modalities to provide enhanced assistance indicated at 81.1%. ### Debt burden and sensitivity indicators (select highlights) - Common Reduction Factor applied (Table 4/7 context): 85.6 percent (as percent reduction of exposure at reference date December 31, 1999, after traditional mechanisms). - External debt and assistance baselines (selected values from tables and figures): - Nominal stock (end-1999): figures shown in tables (e.g., Nominal stock: $948 million noted in figure caption). - NPV of debt before rescheduling (end-1999): 492.7 (US$ million) and re-presented across tables. - After unconditional delivery of HIPC assistance (assumed end-2009 application): PV of total debt 416.4 (US$ million) in one presentation; other scenarios tabulated across 2009–30 and sensitivity analyses show PV of debt-to-exports and PV of debt-to-GDP ratios under baseline and adverse scenarios (see Tables 8–11 for year-by-year series and sensitivity cases). - Sensitivity analysis scenarios (Table 11): show impacts on PV of debt-to-GDP, PV of debt-to-exports, PV of debt-to-revenue, and debt service ratios under: - II.(a) Lower GDP growth: real GDP growth is 1.5 percentage points lower each year than in the baseline scenario, starting 2010. - II.(b) Lower exports: export prices are 15 percent lower than in the baseline, starting in 2010. - II.(c) Lower transfers/grants: grants are 1 percentage point of GDP lower each year starting in 2010. - Debt service and flow indicators (selected aggregates, Table 9): - Before rescheduling: Total external debt service (2010 average examples) 27.1 (US$ millions) and debt service to exports ratio figures presented (e.g., 18.2 percent in memorandum contexts). - After HIPC assistance: Total debt service examples drop markedly (e.g., totals in Table 9 under “After HIPC assistance” reported as 4.3, 4.8, 7.2, etc., by year). - After possible topping-up and MDRI assistance scenarios: debt service and PV debt indicators further adjust as tabulated. ### Policy/action points for Directors (as posed in the document) - Confirm whether Guinea-Bissau has reached the completion point under the HIPC Initiative. - Approve staff recommendation to provide the revised amount of HIPC assistance of US$421.7 million in end-December 1999 PV terms. - Confirm that Guinea-Bissau meets the requirements for topping up. - Confirm that creditors have given sufficient assurances to irrevocably commit HIPC Initiative assistance to Guinea-Bissau. *Source: IMF and World Bank staff estimates and projections as presented in the document (data and tables provided in the content unit)._ ### APPENDIX I ### _cr10380 - APPENDIX I ### Debt management institutional setup - The Public Debt Office (PDO) within the Ministry of Finance (MoF) is responsible for analysis and management of the public debt portfolio. - Externally financed projects often initiated by line ministries, possibly with support/involvement of the Ministry of Economy, Planning and Regional Integration (MEPIR); once creditor negotiations start, the MoF takes the lead and verifies concessionality and other debt objectives, sometimes drawing on technical experience of the BCEAO. ### Legal framework and debt strategy - Legal basis: - The organic law (Article 5) of the MoF and the annual budget law (Article 2) determine the legal framework for debt management. - Both laws underline the exclusive role of the MoF in contracting and administering domestic or external credit to finance the budget financing gap. - Law prescribes financing terms need to be on concessional terms and granting of guarantees can only be proposed by the MoF. - The National People’s Assembly holds ultimate authority over public external debt contracts and guarantees. - WAEMU Regulation No. 9: - Guinea-Bissau has approved Regulation No. 9 on public debt management of WAEMU, which should strengthen the legal framework and lead to the design of a debt strategy. - Currently there is no formal and explicit debt strategy in Guinea-Bissau; Regulation No. 9 will require the country to formulate one. - The country’s implicit debt strategy is guided by the situation of debt distress and the ECF-supported program requirement to contract external debt only on highly concessional terms. - National Committee for Public Debt (NCPD): - Each WAEMU member committed to establish an NCPD comprising national entities involved in public debt contraction and administration; supported by a technical committee including the central bank and other stakeholders. - A draft decree for the NCPD has been finalized by the Ministry of Finance but still needs approval by the Council of Ministers. Only after approval will Guinea-Bissau have met its commitment to WAEMU Regulation 9 and its standards. ### Policy coordination - Fiscal coordination: - Debt management policy is weakly coordinated with fiscal policy, mainly due to lack of a debt strategy and credit constraints. - The PDO prepares and submits forecasts on debt service for annual budget preparation; forecasts are made for the coming budget year only (no medium-term framework). - Forecast is a simple imputation of scheduled debt service; it does not include sensitivity or scenario analysis and does not contain a debt sustainability analysis. - Monetary coordination: - Debt management policy is not coordinated with monetary policy because monetary policy has been transferred to the BCEAO (central bank agent for Guinea-Bissau). - BCEAO issues Treasury Bills to WAEMU-area banks and conducts small-scale foreign currency transactions for monetary policy; these transactions are based on liquidity forecasts prepared by BCEAO and are kept separate from debt management transactions. - MoF provides input for BCEAO liquidity forecasts: debt service and foreign currency disbursement forecasts, and Treasury Account cash flow forecasts. - Cash flow forecasts: Treasury undertakes daily forecasts for the week ahead; BCEAO performs a daily forecast for liquidity management with a two-week horizon. - BCEAO is not allowed to extend direct credit to the Treasury and restricts the amount the Treasury can borrow from the banking sector. - Coordination mechanisms: - Regular meetings between MoF and the central bank include high-level policy meetings and weekly technical meetings on cash flow issues. ### Staff capacity and systems - Staff capacity is weak. - PDO has requested technical assistance and training from the World Bank, AfDB, and UNCTAD. - No systematic electronic record of debt data; PDO staff relies on creditor billing to plan short-term repayments. - Few staff trained in Debt Management and Financial Analysis System (DMFAS) installed at MoF; DMFAS is not being used. - With additional training, operational risks implied by weak capacity could be minimized. ### Debt records and reporting - Debt reporting is scarce; there is no official publication addressing debt issues. - MoF produces monthly outstanding debt stock data, shared among MoF units and included in a quarterly budget execution report. - In absence of a formal debt strategy, debt reports are mainly quantitative and lack normative/policy-oriented framing, making assessment of debt policies against objectives difficult. - No specific report on debt management activities and public debt is sent to the National Assembly. - The annual budget law contains some information on outstanding debt, but the information is incomplete. - IMF has recently included structural reforms on debt reporting in the ECF-supported program. --- ### APPENDIX II — JOINT IMF/IDA DEBT SUSTAINABILITY ANALYSIS (LOW-INCOME COUNTRY FRAMEWORK), November 2010 ### Key conclusion - Despite significant improvement in external debt outlook from HIPC, beyond-HIPC, and MDRI assistance, Guinea-Bissau would face a high risk of debt distress under the baseline assumptions; inclusion of domestic public debt reinforces this conclusion. - If topping-up assistance is provided, Guinea-Bissau would face a moderate risk of debt distress: all debt indicators fall below thresholds in the baseline scenario and remain below throughout the projection period, but two indicators would breach thresholds under stress tests. - The DSA was discussed with and concurred by the authorities. ### Background and data - The March 2010 DSA concluded Guinea-Bissau was in debt distress. - This updated DSA incorporates: - Baseline assumption of HIPC assistance, additional bilateral assistance beyond HIPC, and MDRI assistance following completion point. - Use of a reconciled debt database prepared for the completion point HIPC DSA; data quality improved. - Public and publicly guaranteed (PPG) external debt as of end-2009: - Total PPG external debt: US$1,066.7 million (122 percent of GDP). - Amount in arrears: US$427.5 million. - US$1,066.7 million is a US$26.4 million upward revision from the previous DSA estimate. - Creditor composition: about half multilateral, half bilateral; a small fraction to a single commercial creditor. - Largest multilateral creditors: International Development Association and African Development Bank Group. - Largest bilateral creditors: Portugal and Italy. - Public domestic debt at end-2009: - CFAF 143.1 billion, or 36 percent of GDP. - Nearly half stems from required capital contribution of CFAF 63 billion to join WAEMU in 1998, agreed to be paid over 25 years starting in 2005. - Domestic arrears to the private sector: about CFAF 50 billion at end-2009. - Remainder: other obligations to the BCEAO, including debt resulting from BCEAO’s repayment, on behalf of government, of previous IMF credit to Guinea-Bissau. - Government has requested to renegotiate all of its obligations to the BCEAO consistent with financing under the ECF-supported program. ### Baseline macroeconomic assumptions (2010–2030) — Box 1 summary - Real GDP growth: - 3.0 percent in 2009, about 3½ percent in 2010, gradually recovering to 4.5 percent over the long term. - Long-term cashew production growth: average 4½ percent over 2015-2030. - Inflation: - GDP deflator grows at rate slightly below CPI in 2010. - Long term GDP deflator and CPI projected to grow at historical level of 2.5 percent. - Current account deficit (excluding official transfers): - Declines from 9.3 percent in 2010 to 6.8 percent in 2030. - Exports: - Long-term growth rate of exports of goods and services: 6¼ percent (in dollar terms). - Remittances: - Growth to 7.3 percent (in dollar terms) by 2014; long-term growth at 6½ percent. - Domestic primary fiscal deficit: - Decreases from 3 percent of GDP in 2009 to about 2½ percent in 2030. - Net aid flows: - Budget support grants projected to decline from 7 percent of GDP in 2009 to about 1½ percent in 2030. - External borrowing terms: - External borrowing through 2014 remains on highly concessional terms. - Beginning in 2015, some borrowing on less concessional terms assumed; average grant element of new disbursements falls from 62 percent in 2014 to 32 percent in 2030. - Note: assumptions subject to more uncertainty than usual given fragile political situation. ### IMF ECF financing assumption - Total assistance under ECF arrangement expected to equal SDR 22.4 million (157.5 percent of quota), of which SDR 10.3 million is disbursed in 2010. Remaining disbursements are approximately equally phased over the remaining period of the arrangement. ### External debt sustainability — Baseline scenario - Assumes HIPC completion point reached in December 2010. - Full delivery of HIPC, beyond-HIPC, and MDRI assistance would reduce PPG external debt stock by $803.6 million to $263.1 million. - PV of PPG external debt at end-2010: $203.3 million, equal to: - 24.5 percent of GDP, - 136.4 percent of exports, - 236.1 percent of government revenue (excluding grants). - These two ratios (PV debt-to-exports and PV debt-to-revenue) breach relevant policy-dependent thresholds. - Projected path: - Debt-to-exports ratio projected to remain above threshold of 100 percent until 2017. - Debt-to-revenue ratio remains above threshold of 200 percent until 2015. - Debt service indicators expected to remain below policy-dependent thresholds throughout 20-year projection period, despite a projected increase through 2014 reflecting rescheduling assumptions for post-cutoff bilateral debt. - Text Table 2 summary (thresholds and levels): - PV of debt to GDP: Threshold 30; 2010 = 24.5; 2020 = 15.0; 2030 = 11.4. - PV of debt to exports: Threshold 100; 2010 = 136.4; 2020 = 85.9; 2030 = 67.2. - PV of debt to revenue: Threshold 200; 2010 = 236.1; 2020 = 132.8; 2030 = 98.3. - Debt service to exports: Threshold 15; 2010 = 2.9; 2020 = 5.9; 2030 = 5.0. - Debt service to revenue: Threshold 25; 2010 = 5.0; 2020 = 9.2; 2030 = 7.3. ### External debt sustainability — Alternative scenarios and stress tests - Stress tests indicate high vulnerability: - All five debt sustainability indicators breach thresholds under stress tests. - Export shock (sharp drop in exports in 2011 and 2012) results in continuous breach of PV of debt-to-exports threshold and temporary breach of PV of debt service-to-revenue threshold. (Export shock test assumes new PPG borrowing in 2011–2012 to offset the shock, contributing to increased debt ratios.) - One-time 30 percent nominal depreciation of currency results in temporary breaches of PV debt-to-GDP, debt-to-revenue, and debt service-to-revenue thresholds. - Historical scenario holding key variables at ten-year historical averages shows faster decline in debt indicators than baseline, but underlying data are unreliable. - Topping-up assistance scenario: - All debt indicators remain below thresholds throughout projection period. - PV of debt to exports and PV of debt to revenue peak in 2012 at 88.7 percent and 153.3 percent, respectively, then decline. - Under a topping-up scenario, an export shock would still cause a sustained breach of PV debt-to-exports threshold and a temporary breach of PV debt-to-revenue threshold — indicating a moderate risk of debt distress. ### Public debt sustainability - Baseline scenario (post-completion point): - Total public debt (domestic and external) as percent of GDP falls from 158.3 percent to 63.3 percent and declines to 23.5 percent in 2030. - PV of total public debt to GDP falls from 54.7 percent to 16.3 percent over projection period. - Alternative scenarios and stress tests: - Public debt indicators decline but more gradually under adverse scenarios. - Historical-average scenario: PV of public sector debt to GDP falls from 54.7 percent in 2010 to 40.8 percent over projection period (compared to decline to 16.3 percent in baseline). - PV of public sector debt to revenue and grants falls from 273.9 percent to 175.7 percent under historical-average scenario (compared to decline to 82.1 percent in baseline). - Topping-up assistance: - Total public debt as percent of GDP falls from 50.4 percent to 21.7 percent over projection period. - PV of total public debt to GDP falls from 45.0 percent to 15.1 percent. *Source: APPENDIX I and APPENDIX II of the provided IMF content unit.* ### 13. The LIC DSA indicates that Guinea-Bissau would face a high risk of debt ### _cr10380 - 13. The LIC DSA indicates that Guinea-Bissau would face a high risk of debt ### Key finding - The LIC DSA indicates that Guinea-Bissau would face a high risk of debt distress after reaching HIPC completion point and benefiting from HIPC, beyond-HIPC, and MDRI assistance. ### Baseline scenario - Despite a significant improvement in the debt outlook, two debt sustainability indicators would breach their thresholds in the baseline scenario. ### Stress tests - Stress tests would result in further breaches of debt sustainability indicators. ### Domestic debt - The inclusion of domestic debt reinforces the conclusion of high risk of debt distress. ### Impact of topping-up assistance - If topping-up assistance is provided, all debt sustainability indicators would remain below their relevant thresholds throughout the projection period. - However, under stress tests, two indicators would breach their thresholds, suggesting that Guinea-Bissau would face a moderate risk of debt distress. *Source: _cr10380 - 13. The LIC DSA indicates that Guinea-Bissau would face a high risk of debt* ### 14. Further steps are needed to secure debt sustainability following debt relief at ### 14. Further steps are needed to secure debt sustainability following debt relief at completion point. ### Summary findings and policy implications - Guinea-Bissau should continue to rely on grants and nonconcessional borrowing to meet its financing needs for the foreseeable future. - Lasting debt sustainability will depend on: - strengthening debt management capacity; - making progress on structural reforms; - diversifying the export base; - mobilizing domestic revenue to reduce reliance on external financing. ### Debt relief decision and amounts (press release) - IMF and World Bank announced US$1.2 billion in debt relief for Guinea-Bissau. - Debt service savings (nominal terms) consist of: - US$703.0 million from the HIPC Initiative; - US$107.9 million in expected additional assistance from Paris Club creditors beyond the HIPC Initiative; - US$230.3 million in topping-up assistance; - US$139.2 million from the MDRI. - Debt relief from the IMF and IDA will total: - IMF: US$15.0 million; - IDA: US$347.2 million; - Remaining relief expected from bilateral, commercial, and other multilateral creditors. - The Boards agreed to reduce the debt of Guinea-Bissau to 150 percent of exports at completion point. - Guinea-Bissau becomes the 32nd country to reach the HIPC completion point. ### Key projected macro and debt indicators (selected values preserved exactly as in source) - Real GDP growth (in percent): 3.2, 3.2, 3.0, 2.8, 2.7, 3.5, 4.3, 4.5, 4.7, 4.7, 4.7, 4.4, 4.5, 4.5, 4.5 (series as listed under "Key macroeconomic assumptions"). - Grant-equivalent financing (in percent of GDP): 10.4, 9.0, 11.5, 11.4, 11.3, 11.5, 10.3, 8.9, 9.9 (series as listed). - Grant-equivalent financing (in percent of external financing): 93.2, 86.3, 92.2, 94.5, 96.7, 94.5, 93.7, 88.9, 92.1 (series as listed). - Government revenues (excluding grants, in percent of GDP): 8.0, 9.2, 9.0, 10.4, 10.7, 10.8, 11.0, 11.0, 11.1, 11.3, 11.6, 11.4 (series as listed). - Aid flows (Millions of US dollars): 81.1, 94.4, 134.1, 89.4, 83.4, 107.3, 114.0, 121.1, 134.3, 164.3, 271.5 (series as listed). - of which Grants (Millions of US dollars): 56.8, 68.9, 131.9, 79.9, 64.9, 97.9, 104.1, 110.6, 118.0, 146.8, 241.0 (series as listed). - of which Concessional loans (Millions of US dollars): 24.3, 25.5, 2.2, 9.4, 18.4, 9.3, 9.9, 10.5, 16.3, 17.5, 30.5 (series as listed). - Nominal GDP (Millions of US dollars): 691.7, 846.9, 834.7, 830.7, 868.8, 921.4, 979.2, 1040.3, 1110.3, 1527.7, 2892.1 (series as listed). - PV of PPG external debt (Millions of US dollars): 621.1, 203.3, 222.0, 237.4, 241.1, 230.5, 223.5, 229.2, 329.4 (series as listed). - PV of PPG external debt (in percent of exports): 473.1, 136.4, 134.6, 137.6, 133.6, 122.2, 113.3, 85.9, 67.2 (series as listed). - PV of PPG external debt (in percent of government revenues): 826.8, 236.1, 237.9, 237.8, 223.8, 200.7, 181.6, 132.8, 98.3 (series as listed). - Debt service-to-exports ratio (in percent): 32.1, 31.4, 20.7, 2.9, 1.1, 1.4, 6.8, 12.9, 12.0, 5.9, 5.0 (series as listed). - PPG debt service-to-revenue ratio (in percent): 68.5, 57.1, 36.2, 5.0, 1.9, 2.4, 11.4, 21.1, 19.2, 9.2, 7.3 (series as listed). - Total gross financing need (Millions of US dollars): 40.7, 59.4, 45.4, 44.5, 45.3, 26.2, 32.5, 40.0, 28.4, 36.3, 72.6 (series as listed). - Non-interest current account deficit that stabilizes debt ratio: 31.0, 10.0, 13.7, 94.3, 5.0, 3.8, 4.2, 5.1, 3.3, 3.1, 2.8 (series as listed). - Public sector debt (total, in percent of GDP): 178.8, 167.7, 158.3, 63.3, 62.0, 59.6, 56.0, 51.2, 47.3, 34.7, 34.7, 23.5 (series as listed under "Public sector debt 1/"). - PV of public sector debt (in percent of GDP + remittances): 72.4, 23.8, 24.8, 25.1, 23.9, 21.5, 19.6, 14.6, 11.1 (series as listed). - Gross financing need (in percent of GDP): 25.1, 22.4, 14.5, 15.8, 10.8, 8.0, 8.4, 8.8, 7.9, 5.0, 3.1 (series as listed). - Debt service-to-revenue and grants ratio (in percent): 35.2, 31.3, 13.9, 3.9, 3.9, 2.4, 2.3, 8.3, 13.1, 11.9, 5.7, 4.3 (series as listed). - Primary deficit that stabilizes the debt-to-GDP ratio (in percent): 35.8, 14.8, 6.6, 9.7, 7.4, 3.9, 3.1, 4.1, 5.3, 4.4, 3.2, 2.6 (series as listed). ### Stress tests and sensitivity analysis (selected outcomes preserved exactly) - The most extreme stress tests in various figures correspond to: - One-time depreciation shock; - Exports shock; - Combination scenarios as specified in figure notes. - Table 2 sensitivity outcomes (selected entries): - PV of debt-to-GDP ratio (baseline and scenarios) example entries: Baseline 136, A1 136, A2 213, Topping up 83, B6 136 (series as listed). - PV of debt-to-exports ratio (baseline and scenarios) example entries: Baseline 236, A1 236, A2 223, Topping up 144, B6 236 (series as listed). - PV of debt-to-revenue ratio (baseline and scenarios) example entries: Baseline 311, A1 311, A2 231, Topping up 211, B6 311 (series as listed). - Debt service-to-revenue ratio (baseline and scenarios) example entries: Baseline 522, A1 521, A2 252, Topping up 312, B6 533 (series as listed). - Table 4 public debt sensitivity (selected entries): - PV of Debt-to-GDP Ratio projections: Baseline 55, A1 55, A2 55, Topping up 45, B1 55 (series as listed). - PV of Debt-to-Revenue Ratio projections: Baseline 274, A1 274, A2 274, Topping up 225, B1 274 (series as listed). - Debt Service-to-Revenue Ratio projections: Baseline 42, A1 42, A2 42, Topping up 32, B1 42 (series as listed). ### Recommended continuing actions (implicit in source) - Continue reliance on grants and nonconcessional borrowing in the near term. - Strengthen public debt management capacity to preserve the benefits of debt relief. - Advance structural reforms and diversify exports to improve resilience to shocks. - Mobilize domestic revenue to lower reliance on external financing and improve debt indicators. *Source: IMF country report content and related press release material provided in the PDF chapter.* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2010/_cr10380.pdf_